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world stock market, trade stock
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12/26/07 Investment House Daily
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Investment House Daily Subscribers:
MARKET ALERTS:
Targets hit alerts: AAPL
Buy alerts: IRM; SOHU
Trailing stops: None issued
Stop alerts issued: None issued
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SUMMARY:
- Early retail results give market a reason to sell, but it comes back late.
- Oil pushing back toward $100
- Home sales, prices continue to decline.
- Leaders still poised to move higher toward year end though volume keeps things questionable.
First retail reports are soft, but market handles the news decently.
There were retail issues to start the rest of the week following Christmas. MasterCard reported a 2.4% increase in holiday sales (ex-gasoline), and that was less than expected as was the International Council of Shopping Centers (fancy name) report showing 2.8% year/year growth. To top it off TGT said its December same store sales would run from -1% to +1%, also below expectations. It did not matter that Amazon.com had its best holiday season ever; its sales just don't stack up in size to TGT.
The Schiller housing report didn't help as it showed housing remained very weak (quite the headline there) with the index falling for its tenth straight month as its -6.7% reading undercut already weak -5.9% expectations. That level of activity is the slowest since 1991 during that recession. Hmm. At recession levels in housing, but then again, housing was too high for too long and it crashed. That will still be a drag on the rest of the economy into 2008 because, despite some rather weak signs the housing decline is slowing, it is still declining. Until it bottoms there is additional pressure on consumers.
The MasterCard report overall number was 3.4%, but take out gasoline and it was 2.4%. A full percentage point of the gain (30%) attributable to gasoline purchases. Oil is not giving much relief either. After a couple of failed attempts at $100 and the look as if it was ready to roll over, it has bounced right back. Rumor of a slowing world economy impacted prices, but they recovered, and over the past week have pushed back up to the high side of the nineties. Wednesday it closed at 95.97, up 1.84 after trading over $96 intraday. Gasoline prices have dropped nationally, but they are likely to rise once more if oil continues its rise AND as the MasterCard numbers show, they make up a large portion of what the consumer spends. If the economy slows further, a 'crowding out' effect results as consumers have to buy gasoline to get to work while their discretionary dollars shrink.
That started the market lower Wednesday as reports of the late strength in holiday sales that helped make spirits bright ahead of Christmas faded somewhat. Choppy trade all morning saw each bounce attempt get chop-blocked, keeping the indices in a tight range. Investors were using the retail results as a reason to take some profits after a week of upside in the indices as the market bounced ahead of Christmas, and that kept the market under wraps through the morning session.
Then over lunch stocks found some footing as one of the bounces held. That started a rise through the rest of the afternoon. That bounce managed to get things positive in the last hour only to have more selling push all but NASDAQ, the market leader, negative. A late rebound, however, managed to turn things positive by the close as the bullish bias in this Santa Claus rally continues.
Technically the market showed more of that low to high action marking the intraday bullish bias, at least on the rallies and definitely the rally over the past week. Even the indices got in on the action as SP500 tapped lower to its 200 day SMA on the low and rebounded to close positive.
Internals: The internals matched the rather meager market gains with breadth flat on NYSE and 1.3:1 on NASDAQ. Volume was up but was nothing in the bigger picture as it remained well below average. In short, rather ho-hum as the market simply continued some upside bias in the holiday rally.
Charts: The indices struggled all session but they found footing and rallied after that earlier test lower. SP500 tapped the 200 day SMA on the low and that gave it the terra firma it needed to scratch back to flat. NASDAQ was very interesting as it too rebounded off early weakness and then went on to break the July peak, at least on a closing basis. That was something it was unable to do in early December on the second leg of the initial holiday rally. It has not blown out the top of that resistance, but it is cracking it. Definitely a positive, but as we all know, in weak volume environments such moves mean less. It does show the sellers were not ready to move in just to pile on and push it back down at that point.
Leadership: Leaders were present and accounted for as some large cap tech, energy, metals, alternative energy (e.g. solar), and even China were showing solid upside or were starting to stir for the next bounce higher. The rally has some stocks already extended on light volume, but there are many others just starting to move or moving into position to provide the leadership for the next leg higher. New leadership is always important in keeping a move alive, and the market continues to produce a fairly steady stream during this last rally.
In sum, after a solid week of upside thanks to a Santa Claus rally that picked up from the ashes of the first holiday rally, the market took a breather Wednesday. There was no heavy selling, however, and indeed the market instead reversed and rebounded to erase the losses. It is a good indication that, all things equal, the Santa Clause rally will try to hold together to year end.
THE MARKET
MARKET SENTIMENT
VIX: 18.66; +0.06
VXN: 21.32; -0.1
VXO: 19.2; +0.32
Put/Call Ratio (CBOE): 1.01; +0.11. Back over 1.0 rather quickly after dropping sharply ahead of Christmas. Good to see the worries jump back up quickly.
Bulls: 56.50%. Jumping again, up from 53.3% last week and 49.4% the week before. Didn't make it below 45% (it hit 40.6% on the low for the prior round of selling). It spent 5 weeks above the threshold 55% on the last spike higher. You have to go through the process of wringing out the bulls with a decline of significance, a.k.a. a move into the lower 40's. The theory is that when too many investors or advisors are bullish then most of the money is in the market and there is nothing ready to come in off the sidelines to drive prices higher. On a steady climb from a low of 40.6%, the low for this round. Never made the thirties. Hit 56.7% in June and now it has blown past that. The market peaked about a month later. For reference it bottomed in the summer 2006 near 36%, and 35% is considered bullish.
Bears: 22.4%. Falling like a stone from 25.6% last week and 27.6% the week before. Down from 29.0% after one week at a higher level, jumping from 26.6% the week prior. Up from 22.2% after bouncing up and down over 20 for several weeks. It is still significantly above the threshold 20% considered bearish. Fell to a low of 19.6% on this round. Bearishness peaked at 37.4% on this move and it fell to 18% in August. It topped the June 2006 peak (36%) on this run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005).
NASDAQ
Stats: +10.91 points (+0.4%) to close at 2724.41
Volume: 1.231B (+56.07%). Volume was up but it was still less than half of average as NASDAQ moved higher to the showdown with the July peak.
Up Volume: 839.299M (+276.028M)
Down Volume: 365.767M (+150.458M)
A/D and Hi/Lo: Advancers led 1.27 to 1
Previous Session: Advancers led 1.67 to 1
New Highs: 131 (+22)
New Lows: 126 (+6)
NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg
Gapped lower and then rebounded to post a rather decent gain. The move took it past the July closing high (2720.04), just missing out on taking out the July peak (2724.74). As noted above, NASDAQ failed at putting in a close above that early in December when the initial rally off the November low failed. That makes this an important juncture for NASDAQ, but again, with the low volume it is not really a litmus test as to sustainability. It can, however, show there are cracks in the level for when volume does return.
NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg
SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg
SP500/NYSE
Stats: +1.21 points (+0.08%) to close at 1497.66
NYSE Volume: 839.065M (+56.37%). Volume was up but was down as well, coming in well below average as on NASDAQ. Too low to give any kind of a read on the day other than just a decent recovery from the early weakness to keep the Santa Claus bounce moving.
Up Volume: 417.688M (+4.263M)
Down Volume: 405.708M (+285.942M)
A/D and Hi/Lo: Decliners led 1.02 to 1
Previous Session: Advancers led 3.35 to 1
New Highs: 102 (+1)
New Lows: 124 (+4)
SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg
SP600 CHART: http://investmenthouse.com/ihmedia/SP600.jpeg
DJ30
DJ30 tapped the 90 day SMA on the low and rebounded to close flat. As with the other indices, after the gains heading into Christmas the blue chips gave up some profits early on given the sales data, but then rebounded to close flat. Good intraday shakeout and recovery as DJ30 tries to hold some support at 13,500 and give it a springboard to another try at 13,750 where it failed in the original holiday rally.
Stats: +2.36 points (+0.02%) to close at 13551.69
Volume: 122M shares Monday versus 430M shares Friday.
DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg
THURSDAY
The Wednesday action was inauspicious, but it accomplished a purpose: after a week of gains the market needed to give some back, and it did so on the early retail sales data. Then it found some buyers, though a very few, and rebounded to close flat. It needed a bit of a breather, and this move allowed it that. Now we see if it can continue the rally into the year end and even in to the first couple of sessions of 2008 as that is the historical close to a Santa Claus rally.
NASDAQ is at a key point in its recovery, having reached the early December high where its original rally attempt stalled out. The Fed and the rate cut disappointment had a hand in that, however, and now we see if NASDAQ can move on through, at least for now in this low volume rally environment.
We will continue looking to buy stocks that are in good position to move higher and that we feel will be able to move higher in the new year. It is a bit late to be looking for stocks solely to play the rest of the Santa Claus move, but if a stock has the right combination of pattern and sector then we don't have a problem with taking some positions on a continued move, Santa Claus rally or no.
As the market gets to the close of the traditional Santa Claus rally end (usually a couple of sessions into January), we could see the late 2007 tape painting (filling portfolios with 2007's winners) turn into some selling as those stocks are sold in favor of others that are considered a better value because they are cheaper and could run higher in 2008. Maybe. A lot of the stocks that are working into the end of 2007 are the ones tied to the global economies and have set up nicely to run higher. In other words, they are not really extended to end the year.
You never can tell what the new year will bring because fund managers like to keep their early year moves under wraps. We will look to take some gain off the table as we get the opportunity as the end of the traditional time for the Santa Claus rally draws close, but with stocks that set up good patterns and are making solid moves or are not too far extended, for now we see no reason not to let them run into the new year.
Support and Resistance
NASDAQ: Closed at 2724.41
Resistance:
The March up trendline at 2717
2725 is the July high
2756 is the November/December/February up trendline
2778 from a July 1999 peak
2834 is the October interim peak
2861.51 is the October peak
Support:
The 50 day EMA at 2669
2634.60 is the June peak
The 200 day SMA at 2608
2550 to 2540 from May/June consolidation and the November lows, and that level held on the Tuesday low
2525 is the February closing high
2526 is the August 2004/April 2005/October 2005/March 2007 up trendline
2451 is the August closing low
2386 is the August intraday low
S&P 500: Closed at 1497.66
Resistance:
The 200 day SMA at 1489
1490.72 is the early June closing low and early August peak.
1530 to 1535 are the June twin peaks
1534 is the early July high
1539 is the mid-June intraday high
1541 is the early June high
1558 is the July 2006/March 2007 up trendline
Support:
The 50 day EMA at 1482
1475 from peaks in December 1999 and January 2000
1459 is the February peak
1449 is the June/July 2006 up trendline
1440 - 1437 from January and March peaks
1438 is the November low
1430 from the August interim lows
1425 is some minor support.
1406 is the August closing low
1375 is the March closing low
1370 is the August intraday low
Dow: Closed at 13,551.69
Resistance:
The 90 day SMA at 13,500
13,680 is the July 2006/March 2007 up trendline
The early July peak at 13,671
The early June high at 13,676 (closing), 13,692 (intraday)
The mid-June high at 13,689
The August high at 13,696
13,750 is where it stalled in early December
13,930 is the late October peak
The July high at 14,022
14,088 is the early October closing high
14,198 is the October intraday high.
Support:
The 50 day EMA at 13,411
The 200 day SMA at 13,338
Some support in the 13,050 to 13,000 range
12,845 is the August closing low
12,786 is the February peak
12,743 is the November low
12,518 is the August low
12,250 from late March lows
12,050 from the March 2007 low
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
December 27
Durable goods orders, November (8:30): 2.5% expected, -0.2% prior.
Initial jobless claims (8:30): 340K expected, 346K prior
Crude oil inventories (10:30): -7.5M prior
December 28
Chicago PMI, December (9:45): 52.0 expected, 52.9 prior. Will it slip back below 50 again?
New home sales, November (10:00): 720K expected, 728K prior
End part 1 of 3
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